The source of this uncertainty is the asian currency

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The source of this uncertainty is the Asian currency crisis of 1997 and the incomplete merger with affiliate companies. u\ Other issues Time it took o How to measure performance o Ethics (of a drug maker) Pharmaceuticals Corporate responsibility to make a profit while doing a business in a market with a weak currency Asian currency crisis o Investors lost confidence in smaller Asian country currencies and sold their holdings. This caused a net outflow of hard currency (USD, Euros, etc.) o The resulting panic hit exchange rates; it takes more local currency to buy $1 setting off an inflationary cycle o A country often responds by devaluing its currency and/or freezing transfers out Impact on Novartis Indonesia o The 1997 budget was based on an exchange rate of 2,500 rupiah to the $, but the actual rate topped 10,000 o Business goes into a spiraling decline as risk and uncertainty grow o Bad government policy and misguided regulation worsen the crisis o How did Erickson perform? What could he have done better? What should Novartis Indonesia do? o Raise prices continuously at a rate = or > than inflation o Index pricing to the $ (illegal) o Eliminate all terms to cash on delivery o Delay payables o Don’t sell (ethical and long term implications? Government response?)
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o Hedge strategy o Borrow locally What you borrowed will be less than what you are paying How do we best measure performance during inflation?
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